Market Update Tsys trading higher on strong volume (485k TY futures), US 10Y 2.852% (-3bps), rising in Asia in follow thru to yest psot FOMC rally, and recently with UK gilts after BOE voted to leave rates unch by 7-2 vote. Risk off tone with European stocks -1.3%, S&P futures -19.25. GOCs higher, lagging tsys by 1 bp on top of yest huge 6-10 bp underperformance after a dovish Fed along with the rally in crud and news of progress on NAFTA – 11 bps in 2s post FOMC. Provis mostly unch despite higher GOC yields yest and no supply.
News headlines
Trump Plans to Impose $50 Billion in China Tariffs, Source Says (Bloomberg) President Donald Trump is set to announce about $50 billion of tariffs against China over intellectual-property violations on Thursday, according a person familiar with the matter. The president is considering targeting more than 100 different types of Chinese goods, according to the person, who spoke on the condition of anonymity. The value of the tariffs was based on U.S. estimates of economic damage caused by intellectual-property theft by China, the person said.
Fed Lifts Rates, Steepens Path Through 2020 for More Hikes (Bloomberg) Federal Reserve officials, meeting for the first time under Chairman Jerome Powell, raised the benchmark lending rate a quarter-point and forecast a steeper path of hikes in 2019 and 2020, citing an improving economic outlook. Policy makers continued to project a total of three increases this year. “The economic outlook has strengthened in recent months,” the policy-setting Federal Open Market Committee said in a statement Wednesday in Washington. Officials repeated previous language that they anticipate “further gradual adjustments in the stance of monetary policy.”
Zuckerberg Response Fails to Quiet Critics Scorning Mea Culpas (Bloomberg) Facebook Inc. CEO Mark Zuckerberg broke his silence on the crisis over political-advertising firm Cambridge Analytica’s access to user data on the social network, outlining concrete steps the company is taking to make sure such a leak doesn’t happen again. Critics were underwhelmed. The billionaire finally spoke in a series of media interviews, and a blog post, promising to probe the extent to which “rogue apps” are harvesting sensitive data on the social network. Zuckerberg told CNN that Facebook would inform every one of its two billion-plus users that may have gotten their personal data compromised.
China’s Central Bank Raises Borrowing Costs After Fed Hikes (Bloomberg) China’s central bank increased the cost of short-term loans to commercial lenders, tightening policy in step with the U.S. Federal Reserve. The People’s Bank of China raised the interest rates it charges on 7-day reverse-repurchase agreements by five basis points, the central bank said in a statement. The move is « in line with market expectations and a normal reaction to the Fed’s rate hike », the PBOC said in a statement on the website.
Bonds Rise, Stocks Drop on Trade Fear; Pound Jumps: Markets Wrap (Bloomberg) Government bonds advanced and European stocks declined alongside U.S. equity futures as investors switched their focus from the Federal Reserve to the uncertain outlook for global trade. The dollar steadied, the euro fell and the pound jumped as the Bank of England held interest rates. The tone of trading was largely risk-off, and the Stoxx Europe 600 Index dropped a second day as a slowdown in private-sector growth offset reports the European Union believes it’s on track to be exempted from imminent U.S. tariffs. The greenback was fractionally higher after plunging on Wednesday in the wake of the Federal Reserve meeting, where policy makers signaled the pace of monetary tightening won’t accelerate this year. In Asia, Japanese and Korean stocks advanced while Hong Kong and Chinese shares retreated after China’s central bank also lifted market interest rates.
Canadian PM optimistic over NAFTA as deal on autos seen possible (Reuters) Canadian Prime Minister Justin Trudeau said on Wednesday for the first time that a deal to renegotiate NAFTA was likely, amid signs negotiators may be closer to settling one of the regional trade pact’s most contentious issues. “We remain very confident that a win-win-win deal is not only possible, but likely,” Trudeau told a Toronto business audience.
Bank of England keeps rates steady, two policymakers unexpectedly back hike (BNN) The Bank of England kept rates steady on Thursday but two of its policymakers unexpectedly voted for an immediate rate rise, in a statement that will boost investors’ confidence that borrowing costs will rise in May. Ian McCafferty and Michael Saunders – who were the first officials to call for rates to rise in 2017 – said it was now time for rates to increase again for only the second time since the 2008 financial crisis. Globally, the economy is growing at its fastest rate since the 2007-2008 financial crisis, helping Britain’s at a time when it is suffering from uncertainty about Brexit.
Morneau open to changes on Canadian inflation target (BNN) Finance Minister Bill Morneau said he’d be open to changes in the Bank of Canada’s 2 per cent inflation target when the mandate review comes up in 2021, though the bar for any adjustment remains high. Morneau, speaking to Bloomberg in Buenos Aires, said he hasn’t directly discussed the issue with the central bank, but he’s paying attention to its deliberations. The Bank of Canada has already begun the process of vetting ideas.
Overnight markets
Overview: US 10yr note futures are up 0.391% at 120-14, S&P 500 futures are down -0.68% at 2699.75, Crude oil futures are down -0.51% at $64.84, Gold futures are up 0.73% at $1337, DXY is down -0.04% at 89.747, CAD/USD is down -0.22% at 0.7767.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.856% | 2 Year | 2.299% |
| 5 Year | 2.076% | 5 Year | 2.65% |
| 10 Year | 2.217% | 10 Year | 2.839% |
| 30 Year | 2.334% | 30 Year | 3.063% |
US Economic Data
| 8:30 AM | Initial Jobless Claims, Mar 17th 229k est 225k (226k prior) |
| Continuing Claims, Mar 10th 1828k est 1870k (1879k prior) | |
| 9:00 AM | FHFA House Price Index MoM, Jan est 0.4% (0.3% prior) |
| 9:45 AM | Bloomberg Economic Expectations, Mar (54.5 prior) |
| Bloomberg Consumer Comfort, Mar 18th (56.2 prior) | |
| Markit US Manufacturing PMI, Mar est 55.5 (55.3 prior) | |
| Markit US Services PMI, Mar est 56.0 (55.9 prior) | |
| Markit US Composite PMI, Mar (55.8 prior) | |
| 10:00 AM | Leading Index, Feb est 0.5% (1.0% prior) |
| 11:00 AM | Kansas City Fed Manf. Activity, Mar est 17 (17 prior) |
Canadian Economic Data
There is no Canadian economic data for today.
Disclosure and Disclaimer
The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.
Ivan Greenstein, Stephan Buu, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230